401(k) Rules Change in February
We all want to save more for retirement, right? Right? With pensions going away and mortgages going up like crazy, it’s tough to save for a rainy day, much less save for retirement.
But the government is going to make it easier for us. In February, 2007, barring obscure delaying tactics, the government is changing the rules on the 401(k) program so that workers will be automatically enrolled in the 401(k) program for the company and be forced to opt out. The exact opposite compared to what is done now.
I agree with this. But they busted the rules. Consequently, there’s some good news…and some bad news.
The good news is automatic enrollment and default investment options that the company can place the employee savings into without worry of liability.
The bad news is that if companies do this, they can LOWER the amount of the company match contributed to the employee for not having a choice to enter the plan.
You see, it probably keeps the 401(k) budget even for corporations while nailing the employee on the return. Typical. But having more employee participation in an era where every pension plan is going away.
Study after study has shown that the “automatic enrollment” ups the amount saved by employees as compared to the current “opt-in” model in use.
I don’t like it because I’ve already opted in and my company match will most likely be lowered. But for many employees, it’s a good thing because they would have saved nothing before.
Does your company still have a pension plan? How are you saving for retirement? Are you even thinking about saving for retirement?
Scot
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